For week of July 4, 2005, Issue #219

 

Featured Articles:

1.  Summer Jobs for Children

2.  Fraud Footnotes: How it Could Happen to You; continued

3.  Tech tip Weekly: Melissa's Long Gone; Schooled in Security

4.  Compliance Calendar

 

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1.  Summer Jobs for Children

 

Many families that run their own businesses have received tax deductions by giving their children jobs for the summer.  Not to mention the added benefit of your child earning a little extra cash and good experience!  Even relatively young children can perform useful work - whether it's helping with filing, packing orders for shipment, or learning basic office skills.  Generally, they'll pay little or no tax on what they earn.  For 2005, they can offset up to $5,000 of earnings with their own standard deduction.  After that, they'll pay only a 10% rate on the next $7,300 earned.  Your business can take a deduction for the wages paid, just as it does for any employee.

 

There could be an added bonus if your child is under age 18 and the business is unincorporated.  In that case, a child under 18 is usually exempt from paying FICA taxes and the business does not have to pay the employer share of those payroll taxes.

 

To satisfy the IRS, follow these tips.

 

-Make sure it's a real job that's related to the business.  It's a good idea to document the job duties. 

 

-Pay a wage that's reasonable for the work performed.

 

-Keep records of the hours your child works.

 

-Pay your child regularly, preferably using your standard payroll procedures.

 

And finally, keep the arrangement as business-like as possible, especially if you have other employees.  This means not showing favoritism to your child and keeping family disputes out of the workplace.

 

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2.  Fraud Footnotes: How it Could Happen to You; continued

 

Employees can use several methods to embezzle cash.  The most common is to falsify expenditures from a company's bank account.  These could include just about anything from billing and expense schemes (paying fraudulent invoices from nonexistent companies and or expense) to payroll frauds (payments to nonexistent employees or to current employees based upon falsified time sheets).

 

But embezzlement can be something as simple and obvious as payments and transfers made directly to the employee's personal accounts --- which would be easily detected if proper internal controls are in place but just as easily overlooked if they are not.

 

Another extremely common embezzlement scheme is skimming - taking money from the business before it has been received and recorded by the company.  Businesses that deal in a lot of cash transactions are especially at risk.  If aware that no one is verifying the day-to-day transactions, a cashier or a bookkeeper may feel safe pocketing a little each day, which may quickly add up to a large amount.

 

One more way to embezzle is larceny, that is stealing the money the company has received and recorded; or stealing the inventory.  Either of these larcenies can be easily detected when company assets are closely monitored, inventory is periodically counted, unless the person doing the stealing is the one doing the counting!

 

To protect the business...next week.

 

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3.  Tech Tip Weekly: Melissa's Long Gone; Schooled in Security

 

Melissa had a profound impact on the learning curve at Microsoft.  With the use of its e-mail software as the primary means of spreading the virus, Microsoft began making major amendments to its applications in the name of security.  This was begun before the next major wave of viruses ran rampant across the Internet, the Code Red and Nimda worms.

 

By 2000, Microsoft had launched updates to Outlook that limited the type of attachments that could be sent through the mail client, blocking many common types of executable files; the list has now grown to over 70 including Word documents, screensavers, attachments and others.

 

On the other side, Melissa also held lessons for virus writers.  The electronic trail left by David L. Smith, author of the malicious code, spawned a worldwide manhunt which finally succeeded in his arrest and serving 19 months in prison, being released in December 2004.

 

Final thoughts on Melissa's legacy next week.

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4.  Compliance Calendar

 

July 7

-Employers deposit Social Security, Medicare and withheld income tax for payments June 29, 30 and July 1.